Rational decision making - The benchmark for making effective decisions
Rational decision making brings a structured or reasonable thought process to the act of deciding. The choice to decide rationally makes it possible to support the decision maker by making the knowledge involved with the choice open and specific. This can be very important when making high value decisions that can benefit from the help of tools, processes, or the knowledge of experts.
Characteristics of rational decision making
Choosing rationally is often characterized by the following:
- Decision making will follow a process or orderly path from problem to solution.
- There is a single best or optimal outcome. Rational decisions seek to optimize or maximize utility.
- The chosen solution will be in agreement with the preferences and beliefs of the decision maker.
- The rational choice will satisfy conditions of logical consistency and deductive completeness.
- Decision making will be objective, unbiased and based on facts.
- Information is gathered for analysis during the decision making process.
- Future consequences are considered for each decision alternative.
- Structured questions are used to promote a broad and deep analysis of the situation or problem requiring a solution.
- Risk and uncertainty are addressed with mathematically sound approaches.
In the ideal case, all rational decision makers would come to the same conclusion when presented with the same set of sufficient information for the decision being made. This would suggest that collaborative decision making will often employ a rational decision making process.
Problems and limitations with choosing rationally
Most of the issues and limitations associated with rational choice result from falling short of the ideal proscribed in the full rational decision making model. Here are three areas that generate much of the concern.
- Limits of human capabilities - The limits on our human ability to gather, process, and understand all the information needed to optimize a decision outcome make it impractical to meet the ideal except in very constrained or simple situations. We have limits in our ability to formulate as well as solve very complex problems. Our desire to optimize is also limited, and we will usually "saticfice", or be content with acceptable solutions when confronted with obstacles.
- Limits on information and knowledge - The model assumes we should or can gather sufficient information in terms of quantity, quality, accuracy, and integrity. It also assumes that we have access to the required knowledge of the cause and effect relationships that are important to the evaluation of alternative solutions, particularly with respect to projecting future consequences.
- Limits in time - Search for the optimum solution will generate a delay that could negatively impact the benefits of the chosen alternative. In essence, if the decision alternatives are not properly discounted for changes due to decision timing, the chosen alternative may not be optimum.
More on decision making models
As with any ideal, additional models have been developed to address the problems with realizing the full rational model. The Bounded Rationality model acknowledges our cognitive and environmental limits and suggests that we act rationally within these constraints. Many decision making theories are a result of looking at the consequences of bounded rationality.
Rational ignorance takes a similar approach to looking at the cost of gathering information. In this model, it is suggested that if the cost to acquire information exceeds the benefits that can be derived from the information, it is rational to remain ignorant. This aligns with our concept of using decision value to limit the decision effort, ensuring an appropriate return from using a rational decision making process (See planning decision making).
The benefits of rational choice
Within the limitations described above, choosing rationally can provide a number of benefits that include:
- Addressing complex decisions by breaking them down
- Characterizing decision problems and goals to ensure addressing all needs and desires
- Being aided by structured techniques, mathematics, and computers
- Ongoing improvement when codified in a process, procedure, or program
- A long list of decision making techniques and tools with proven usefulness
- A growing capability to analyze and access the information that can improve guidance based on the facts
While unable to meet the requirements of the full rational decision making model, this ideal serves as a valuable approximation that supports predictions and decision making with increasingly broad application. Rational approaches continue to provide the standard for effective decision making when considered in light of current limitations. Coping with complexity and information overload will place greater demand on enhancing capabilities that support rational choice.
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This paper is basically concerned with a brief discussion on the decision making processes that are being followed in the organizations, in order to effectively meet out the complex demands of the modern customers. In addition to this, the paper will also include a brief discussion on the ways through which managers can transform these decisions into a more ethical one in the context of contemporary organizations. Finally, the paper concludes with a brief conclusion on the major findings from the analysis about the decision making processes in the given paper.
Decision making is an important perspective that persists in case of almost all the organization whether it is big or small organization. It becomes essential for the managers to take decisions in order to conduct the activities of the organization in the most efficient manner. Managers in the organization are best referred to as the decision makers and as such, the success or the failure of the organization to a larger extent depends upon its decision makers. Good decision by managers would lead to overall success and a bad one would lead to the failure of the organization. This implies that decision making is quite crucial for the success of the business organization. Decision making is usually done in case of a complex changing environment which comprises of constantly changing factors. As a result, best managers of the successful companies sometimes make blunder while taking important decision for the entire organization. As the business environment is changing at a rapid pace, managers in organizations are dealing with a higher percentage of non programmed decisions. This implies that the complex decision making environment have increased the difficulties in the decision making process and as such, there is a need for a new decision making processes in the organization, for the purpose of ensuring effective decision making that leads to the overall success of the organization. However, the managers should adopt a rational decision making approach while dealing with the complex problem of the organization. This is because, the rational approach focus on the need for systematic analysis of a problem which is followed by a logical step by step sequence. A systematic procedure should be followed by the managers while taking important decisions. A deep understanding to the managers about the decision making process would help him in taking better decisions even there exists a lack of clear information (Lozano 2001, 126-128). The decision making processes that should be followed by managers in solving the complex problems of the organization is discussed as follows:
1. Monitoring the Decision Environment
The first step in the effective decision making process is to monitor the decision environment. The manager should monitor the internal as well as the external information and should try to find out deviations in the planned and acceptable behavior (Daft 2009, 450-57).
2. Define the Decision Problem
The next major step in the decision making process is to define the problem. The deviations as identified in the first step would help the managers in defining the decision problem in the most effective manner, as it will provide with the exact reason for such deviations.
3. Specifying Decision Objectives
The objectives to be achieved from the decision should be specified by the managers. In simple words, it implies the aim that should be achieved from the entire decision making process.
4. Diagnose the Problem
This implies the critical evaluation of the problem. A proper analysis should be conducted in order to identify the major reason for the occurrence of the problem. In order to facilitate the diagnosis, additional data should be collected if required. A proper understanding of the major reason for the problem would lead to a better solution of the entire problem and would help the managers in taking decisions in future in a more appropriate manner (Daft 2009, 450-57).
5. Develop Alternative Solutions
Before moving towards a decisive action plan, the manager should have a clear understanding of various options that are available to him in the achievement of the desired objectives. In order to have a better understanding, the manager may seek ideas from the other people of the organization.
6. Evaluate Alternatives
The alternatives as identified in the above mentioned step need to be evaluated for the purpose of making the best possible decision to the problem in hand. The ideas from different people in the organization would result into various solutions and as such, the best possible one has to be identified by making a critical evaluation of all such ideas (Daft 2009, 450-57).
7. Choosing the Best Alternatives
The evaluation of all the alternatives would provide with the solution of the given problem with the best possible alternatives. Thus the alternatives that seem to be best among the others should be chosen, so that a better decision can be possible.
8. Implementation of the Chosen Alternatives
The final step in the decision making process is the implementation of the chosen alternatives to achieve the desired objectives. The manager should use his skills and abilities in order to ensure that decision is carried out. This is the important step of the entire decision making processes as an improper implementation of the decision would result into a failed decision. The implementation of alternatives would be followed by a monitoring process (Daft 2009, 450-57).
The first four stage of the entire decision making process can be regarded as the problem identification stage and the next four implies the problem solution stage of the decision making process.
Ethical Transformation of Decisions
One of the major area that needs attention in the current decision making process is the ethical decision making. The management of ethical behavior in the organization is one of the major problems as faced by managers in the organizations today. The decisions of the employees to behave in an ethical manner or not is highly influence by the situational factors. Decision history, personality and the managerial philosophy are the few factors through which the employee’s behavior can be changed towards the more ethical one (Stead, Edward and Stead 1990, 233-42). This implies that the managerial philosophy have a major role to play in transforming the decisions into an ethical one.
In order to ensure ethical decision making by managers and individuals in organization, Thomas M Jones (1991) suggest an issue contingent models which contains a new set of variables known as moral intensity. Moral intensity can be defined as a construct that considers the extent of issue related moral imperative to a particular situation. The moral intensity is not concerned with traits of the moral decision makers or the organizational culture, rather its major emphasis is on the moral issue, so that ethical decision making and behavior can be ensured in the organization by focusing on the characteristics of moral issue (Jones 1991, 366-95).
Linda Klebe Trevino (1986), have proposed an Interactionist model in order to ensure ethical decision making within the organization. There has been a huge attention being given to the ethical decision making in organization, particularly because of variety of reasons such as increasing public concern about the ethical behavior of the organizations, managers cynicism etc. The interactionist model of ethical decision making implies that the situational and the individual variables interact with the cognitive component in order to determine the ways in which the managers behave in response to an ethical dilemma. Such behaviors can be identified and necessary actions can be taken in order to transform the decisions of the managers towards a more ethical perspective (Trevino 1986, 601-17).
The decisions of the managers in the organizations would affect by a numerous number of factors in future such as the social, environmental as well as the economic concerns as well. In order to effectively combat such complex situation and to take decision that are ethically acceptable, it becomes essential that the Decision Support System of the organization should embrace procedures that can effectively deal with such complexities and enables the managers in taking a more of ethical decisions (Courtney 2001, 17-38).
Thus, all the above mentioned models as proposed by various scholars in the past can be made use of, in transforming the decision of managers towards more ethical oriented decisions. In addition to all these models, the decision making processes as discussed above, can also be made use of for encouraging managers to take ethical decisions. A study conducted by James W Dean and Mark P. Sharfman (1996) on the importance of decision making process implies that the decision making processes are related to the success of the decision. By following each and every steps of decision making processes, managers can ensure success of the entire decision making and ultimately the compliance of such decision with that of the ethical aspects as well (Dean and Sharfman 1996, 368-96).
A brief discussion on the decision making processes and the ethical aspects of the managerial decision provides a significant learning about its importance in the complex business environment. The decision making has been a crucial aspect that leads to the success as well as the failure of the organizations. As such, it should be taken with great care. A brief discussion on the various decision making processes implies that there are various stages in the entire decision making process and proper compliance of all such processes by the managers would enable the managers to take better decisions. In addition to this, there is an increasing pressure on the managers to ensure the compliance of ethical aspects in their decision making. The increasing awareness about the environmental concern among the public have been the major reason driving the managers to take ethical decisions. As such, it becomes essential that the decisions of the managers should be transformed towards a more ethical decision and this could be possible with the help of various models as proposed by various scholars such as interactionist model, moral intensity, decision support systems etc. In addition to this, the decision making processes would also help in achieving success in the decision making process and ultimately in ensuring a more ethical decision as well.